In a Notice, the IRS has determined that Medicaid coverage limited to COVID-19 testing and diagnostic services is not minimum essential coverage under a government-sponsored program. Thus, an individual’s eligibility for this coverage for one or more months does not prevent those months from qualifying as coverage months for purposes of determining eligibility for the premium tax credit under Code Sec. 36B.
Background.
Section 6004(a)(3) of the Families First Coronavirus Response Act (Families First Act, PL 116-127) authorizes states to provide COVID-19 testing and diagnostic services to uninsured individuals covered under Medicaid.
Beginning in 2014, under the Patient Protection and Affordable Care Act (PL 111-148) and the Health Care and Education Reconciliation Act of 2010 (PL 111-152) (collectively, PPACA), eligible individuals who purchase coverage under a qualified health plan through a Health Insurance Exchange (Exchange) established under section 1311 of the PPACA may claim a premium tax credit under Code Sec. 36B.
Code Sec. 36B and Reg §1.36B-3(a) provide that a taxpayer is allowed a premium tax credit only for months that are coverage months for individuals in the taxpayer’s family, as defined in Reg §1.36B-1(d).
Under Reg §1.36B-3(c)(1)(iii), a coverage month for an individual includes only those months the individual is not eligible for minimum essential coverage other than coverage in the individual market.
Minimum essential coverage is defined in Code Sec. 5000A(f) and generally includes coverage under government-sponsored programs, including Medicaid coverage. However, the IRS can and has determined that certain health care coverage providing limited benefits is not minimum essential coverage under a government-sponsored program. For example, Reg § 1.5000A-2(b)(2)(ii) says that tuberculosis-related services are not minimum essential coverage.
Interim guidance.
The IRS has determined that Medicaid coverage limited to COVID-19 testing and diagnostic services under section 6004(a)(3) of the Families First Act is not minimum essential coverage under a government-sponsored program. Thus, an individual’s eligibility for this coverage for one or more months does not prevent those months from qualifying as coverage months for purposes of determining eligibility for the premium tax credit under Code Sec. 36B. (Notice 2020-66, Sec. 3)
Future guidance.
The Notice also announced that the IRS intends to amend Reg §1.5000A-2 to add Medicaid coverage of COVID-19 testing and diagnostic services to the list of health care coverage that is not minimum essential coverage under a government-sponsored program. (Notice 2020-66, Sec. 1)
Effective date.
The Notice applies to tax years beginning in or after 2020. Until further guidance is issued, taxpayers may rely on the interim guidance described in the Notice.
Further, if no proposed regs or other guidance is released within 18 months after September 28, 2020 (the date the Notice is scheduled to be published in the Internal Revenue Bulletin), taxpayers may continue to rely on the interim guidance described in the Notice but, until additional guidance is issued, the IRS will not assert a position adverse to any taxpayer, including an applicable large employer under Code Sec. 4980H, based in whole or in part on the Notice. (Notice 2020-66, Sec. 4)
Observation.
While the IRS uses the connecting word “but” in the above paragraph, presumably it meant to use “and.”
To continue your research on minimum essential coverage, see FTC 2d/FIN ¶A-6403; United States Tax Reporter ¶5000A4.
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